SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Mercantile Bankshares Corporation
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(Name of Registrant as Specified In Its Charter)
Mercantile Bankshares Corporation
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<PAGE>
MERCANTILE BANKSHARES CORPORATION
TWO HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Mercantile Bankshares Corporation
("Mercshares") will be held at 10:30 a.m. on April 27, 1994, in the Boardroom of
Mercantile-Safe Deposit and Trust Company, Two Hopkins Plaza, Baltimore,
Maryland, for the following purposes:
1. To elect Directors to serve until the next Annual Meeting of
Stockholders, and until their successors are elected and have qualified.
2. To ratify the appointment of Coopers & Lybrand as independent public
accountants to audit the financial statements of Mercshares for 1994.
3. To approve the Mercantile Bankshares Corporation and Affiliates Annual
Incentive Compensation Plan as more particularly described in the
enclosed Proxy Statement.
4. To transact such other business as may be properly brought before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 18, 1994,
will be entitled to receive notice of, and vote at, this meeting.
These matters are explained more fully in the enclosed Proxy Statement.
EACH STOCKHOLDER IS CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO MARK, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE.
THE GIVING OF THIS PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE IT AND TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
JOHN A. O'CONNOR, JR.
Senior Vice President and Secretary
Dated: March 24, 1994
<PAGE>
MERCANTILE BANKSHARES CORPORATION
PROXY STATEMENT
This statement is furnished in connection with the solicitation of proxies
by Mercantile Bankshares Corporation ("Mercshares") to be used in voting at the
Annual Meeting of Stockholders on April 27, 1994, and at any adjournments
thereof.
Holders of shares of Common Stock of Mercshares ("Common Stock") of record
at the close of business on March 18, 1994, will be entitled to vote at the
meeting. The number of shares of outstanding Common Stock as of January 31,
1994, entitled to vote is 46,017,258 shares. The Common Stock is entitled to one
vote per share.
Unless otherwise instructed, it is intended that the shares represented by
valid proxies will be voted for the election of the 18 persons named below as
nominees to serve as Directors until the next Annual Meeting of Stockholders,
and until their successors are elected and have qualified, for the ratification
of the appointment of auditors and for the approval of the Annual Incentive
Compensation Plan.
According to Schedules 13G filed with the Securities and Exchange
Commission ("SEC"), as of December 31, 1993, the following companies were the
beneficial owners of more than 5% of the Common Stock, as indicated:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP(A) OF CLASS
- ------------------------------------------------------------------------------------- ---------------------- -------------
<S> <C> <C>
First Pacific Advisors, Inc.
11400 West Olympic Blvd.
Los Angeles, CA 90064................................................................ 2,458,800 5.3
J.P. Morgan & Co. Inc.
60 Wall Street
New York, NY 10260-0060.............................................................. 2,642,050 5.7
<FN>
- ---------------
(a) For the purpose of Schedule 13G reports, beneficial ownership is required to
be determined in accordance with the provisions of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, under which, in general, a
company is deemed to be the beneficial owner of a security if it has or
shares the power to vote or to direct the voting of the security or the
power to dispose of or to direct the disposition of the security, or if it
has the right to acquire beneficial ownership of the security within 60
days.
</TABLE>
Except as indicated above, to the best of the knowledge of the management
of Mercshares, no person owns beneficially more than five percent of its
outstanding shares.
ELECTION OF DIRECTORS
The Bylaws of Mercshares provide that there shall be 18 Directors.
The Board of Directors of Mercshares meets regularly five times each year
and is subject to call for special meetings. The Board met at its five regular
meetings in 1993.
Generally, the Directors serve until the annual meeting of stockholders
next following their election. Officers are elected annually by the Board to
serve for such periods of time as the Board determines.
Mercshares has an Audit Committee and a Compensation Committee which are
comprised solely of non-officer Directors and are elected annually by the Board.
The members of these Committees are indicated in the list of nominees below.
Mercshares has no nominating committee.
The Audit Committee recommends to the Board the persons or firms to be
employed as independent public accountants, consults with the independent public
accountants with respect to
1
<PAGE>
the scope of their audit, the proposed fee and the reports to be rendered,
reviews such audit reports and evaluates the internal audit programs of
Mercshares and its affiliates. It is authorized to determine the advisability of
engaging the independent public accountants to make and report on special
studies, and to examine and consider such other matters as it or the Board deems
desirable. The Audit Committee held one meeting in 1993.
The Compensation Committee performs those functions as are described in the
Report of the Compensation Committee. It held four meetings in 1993.
It is proposed that the persons listed below be elected Directors of
Mercshares, to serve until the next Annual Meeting of Stockholders, and until
their successors are elected and have qualified. It is not expected that any of
the nominees named herein will be unavailable for election, but if a nominee
should be unable to serve, the shares represented by the enclosed proxy may be
voted for a substitute nominee to be designated by management. Mercshares owns
100% of the capital stock of Mercantile-Safe Deposit and Trust Company
("Merc-Safe"). As indicated below, all of the nominees are Directors of
Merc-Safe. All nominees previously have been elected Directors of Mercshares by
the stockholders.
The names of the nominees, their ages as of April 27, 1994, their principal
occupations and business experience for the past five years, the number of
shares of Common Stock deemed under certain federal securities laws to be
"beneficially owned" by each as of January 31, 1994, and certain other
information, are set forth below. In some instances, "beneficial ownership" of
shares may be deemed to exist by reason of voting or investment power even
though other persons, such as family members or beneficiaries of trusts, have
the economic interest in the shares, and in certain instances "beneficial
ownership" may be disclaimed by a nominee.
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
H. Furlong Baldwin 62 Chairman of the Board and Chief Executive
Officer, Mercshares, and Chairman of the
Board and Chief Executive Officer,
Merc-Safe. Mr. Baldwin has been Chairman of
the Board of Mercshares since 1984, and has
been its Chief Executive Officer since
1976. He has been Chairman of the Board and
Chief Executive Officer of Merc-Safe since
1976. Mr. Baldwin is a Director of
Baltimore Gas & Electric Company,
Consolidated Rail Corporation, GRC
International Inc. and USF&G Corp. He was
elected a Director of Merc-Safe in 1968.
Elected Director of Mercshares: 1970
Member: Executive Committee
Owns beneficially 175,227 shares of Common
Stock.
Thomas M. Bancroft, Jr. 64 Former Chairman of the Board and Chief
Executive Officer, The New York Racing
Association, Inc. Mr. Bancroft occupied
that position from 1983 until January,
1990. He was elected a Director of
Merc-Safe in 1974.
Elected Director of Mercshares: 1974
Member: Audit Committee
Owns beneficially 7,500 shares of Common
Stock.
2
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NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
Richard O. Berndt (1) 51 Partner, Gallagher, Evelius & Jones, a law
firm engaged in the general practice of
law. Mr. Berndt has been a partner in that
firm since 1972. He was elected a Director
of Merc-Safe in 1976.
Elected Director of Mercshares: 1978
Member: Audit Committee
Owns beneficially 17,430 shares of Common
Stock.
James A. Block, M.D. 53 President and Chief Executive Officer,
Johns Hopkins Health System and The Johns
Hopkins Hospital. Dr. Block has occupied
these positions since July, 1992. Prior
thereto, he was President and Chief
Executive Officer of University Hospitals
of Cleveland. Dr. Block was elected a
Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992.
Owns beneficially 450 shares of Common
Stock.
George L. Bunting, Jr. 53 President and Chief Executive Officer,
Bunting Management Group, a private
financial management company. Mr. Bunting
has occupied this position since July,
1991. From April, 1986 to July, 1991, he
was Chairman of the Board and Chief
Executive Officer of Noxell Corporation and
prior thereto, he was President and Chief
Executive Officer of that Corporation. Mr.
Bunting is a Director of Bell
Atlantic-Maryland, Inc., Crown Central
Petroleum Corporation, USF&G Corp. and PHH
Corporation. He was elected a Director of
Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Owns beneficially 1,500 shares of Common
Stock.
Douglas W. Dodge 61 Vice Chairman of the Board, Mercshares, and
President and Chief Operating Officer,
Merc-Safe. Mr. Dodge has been Vice Chairman
of the Board of Mercshares since 1984. He
has been Chief Operating Officer of
Merc-Safe since 1984, and its President
since 1983. He was elected a Director of
Merc-Safe in 1983.
Elected Director of Mercshares: 1984
Member: Executive Committee
Owns beneficially 76,482 shares of Common
Stock.
3
<PAGE>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
Edward K. Dunn, Jr. 58 President, Mercshares, and a Vice Chairman
of the Board, Merc-Safe. Mr. Dunn has
served in those capacities since March,
1991. From March, 1988, to March, 1991, he
was Chairman of the Executive Committee,
Mercshares and Merc-Safe. He was elected a
Director of Merc-Safe in 1988.
Elected Director of Mercshares: 1988
Member: Executive Committee
Owns beneficially 105,101 shares of Common
Stock, including 6,606 shares held by a
trust of which he is a co-trustee, and
15,000 shares held by a foundation of which
he is a co-trustee and officer.
B. Larry Jenkins 55 Chairman of the Board, President and Chief
Executive Officer, Monumental Life
Insurance Company, providing individual
life insurance. Mr. Jenkins has served in
this capacity since 1983. In addition, he
was Executive Vice President, Monumental
Corporation, a diversified business
institution concentrating in the fields of
insurance and finance, from 1982 to 1989
when he became Vice President of Aegon USA,
Inc., the parent company of Monumental
Corporation. In 1992 he became Senior Vice
President. He was elected a Director of
Merc-Safe in 1983.
Elected Director of Mercshares: 1983
Member: Audit Committee
Owns beneficially 5,100 shares of Common
Stock.
Robert D. Kunisch 52 Chairman of the Board, President and Chief
Executive Officer, PHH Corporation, a
diversified business services company
engaged primarily in providing integrated
management services, information products
and expense management programs including
vehicle fleet management, relocation and
real estate services and mortgage banking
services. Mr. Kunisch has served in this
capacity since August, 1989. From 1988 to
August, 1989, he was President and Chief
Executive Officer. Prior thereto, Mr.
Kunisch was President and Chief Operating
Officer. Mr. Kunisch is a Director of CSX
Corporation and GenCorp. He was elected a
Director of Merc-Safe in 1984.
Elected Director of Mercshares: 1984
Member: Executive Committee
Audit Committee
Compensation Committee
Owns beneficially 1,500 shares of Common
Stock.
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<PAGE>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
William J. McCarthy (2) 63 Principal, William J. McCarthy, P.C., which
is a partner in Venable, Baetjer and
Howard, a law firm engaged in the general
practice of law. Either Mr. McCarthy or his
professional corporation has been a member
of that firm since 1964. He was elected a
Director of Merc-Safe in 1975.
Elected Director of Mercshares: 1975
Member: Executive Committee
Owns beneficially 1,500 shares of Common
Stock.
Morris W. Offit 57 Chairman of the Board and Chief Executive
Officer, OFFITBANK, a private New York
State bank offering integrated investment
management services to individuals,
corporations, pensions, trusts and
not-for-profit institutions. Mr. Offit has
served in this capacity since July, 1990.
Prior thereto, he was President, Offit
Associates, Inc. Mr. Offit is a Director of
Duty Free International, Inc. He was
elected a Director of Merc-Safe in 1984.
Elected Director of Mercshares: 1984
Member: Executive Committee
Compensation Committee
Owns beneficially 92,400 shares of Common
Stock.
Christian H. Poindexter 55 Chairman of the Board and Chief Executive
Officer, Baltimore Gas & Electric Company,
an investor-owned diversified gas and
electric utility. He has occupied that
position since January, 1993. From August,
1989 through December, 1992, Mr. Poindexter
was Vice Chairman of the Board. From 1985
to August, 1989, he was President and Chief
Executive Officer of Constellation
Holdings, Inc., a diversified business
company which is a subsidiary of Baltimore
Gas & Electric Company. He was elected a
Director of Merc-Safe in 1987.
Elected Director of Mercshares: 1987
Member: Executive Committee
Compensation Committee
Owns beneficially 1,050 shares of Common
Stock.
William C. Richardson 53 President, Johns Hopkins University. Dr.
Richardson has served in this capacity
since 1990. Prior thereto, he was Executive
Vice President and Provost, Pennsylvania
State University. Dr. Richardson is a
director of CSX Corporation. He was elected
a Director of Merc-Safe in 1991.
Elected Director of Mercshares: 1991
Owns beneficially 150 shares of Common
Stock.
5
<PAGE>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
Bishop L. Robinson 67 Secretary of The Department of Public
Safety and Correctional Services for the
State of Maryland. Mr. Robinson has
occupied that position since 1987. Mr.
Robinson was elected a Director of
Merc-Safe in 1989.
Elected Director of Mercshares: 1989
Member: Audit Committee
Owns beneficially 96 shares of Common
Stock.
Donald J. Shepard 47 Chairman of the Board, President and Chief
Executive Officer, Aegon USA, Inc., a
holding company owning insurance and
insurance related companies. Mr. Shepard
has occupied the position of President and
Chief Executive Officer since 1989. He was
elected Chairman of the Board in 1992.
Prior thereto, he was Executive Vice
President and Chief Operating Officer of
Life Investors, Inc., which changed its
name to Aegon USA, Inc. on January 1, 1989.
Mr. Shepard is a member of the Executive
Board of Aegon, nv. He is a Director of PHH
Corporation. Mr. Shepard was elected a
Director of Merc-Safe in 1992.
Elected Director of Mercshares: 1992
Member: Compensation Committee
Owns beneficially 3,000 shares of Common
Stock.
Brian B. Topping 59 Vice President, Mercshares, and a Vice
Chairman of the Board, Merc-Safe. Mr.
Topping has been Vice President of
Mercshares since 1988. He has served as a
Vice Chairman of the Board of Merc-Safe
since 1984. Mr. Topping was elected a
Director of Merc-Safe in 1983.
Elected Director of Mercshares: 1988
Owns beneficially 54,000 shares of Common
Stock.
Jay M. Wilson 47 Former President, Steeltin Can Corporation,
engaged in the manufacture and distribution
of metal and plastic containers. Mr. Wilson
occupied that position until January, 1994.
He was elected a Director of Merc-Safe in
1989.
Elected Director of Mercshares: 1989
Owns beneficially 6,252 shares of Common
Stock.
6
<PAGE>
NAME AGE INFORMATION
- ---------------------------- --- -------------------------------------------
Calman J. Zamoiski, Jr. 66 Chairman of the Board, Independent
Distributors, Incorporated, a general
wholesale distributor. Mr. Zamoiski has
occupied that position since April, 1991.
Prior thereto, he was President. He was
elected a Director of Merc-Safe in 1976.
Elected Director of Mercshares: 1978
Member: Executive Committee
Compensation Committee
Owns beneficially 28,300 shares of Common
Stock.
- ---------------
(1) The firm of Gallagher, Evelius & Jones renders legal services to Merc-Safe
and certain accounts of which it is a fiduciary, and certain other
Mercshares affiliates.
(2) The firm of Venable, Baetjer and Howard renders legal services to
Mercshares, certain of its affiliates and certain accounts of which
Merc-Safe is a fiduciary. It also leases its Baltimore office space from an
affiliate of Mercshares.
All of the Directors have attended 75% or more of the total number of
meetings of the Board of Directors and Committees of Mercshares on which they
served during 1993.
William B. Potter is currently a Director but does not plan to stand for
reelection. On January 31, 1994, Mr. Potter owned beneficially 2,250 shares of
Common Stock. John A. O'Connor, Jr., an executive officer named in the Summary
Compensation Table, but who is not a Director or a nominee for election as a
Director, owned beneficially on January 31, 1994, 9,600 shares of Common Stock.
No Director, nominee or officer of Mercshares was the "beneficial owner" of
as much as 1.0% of the outstanding shares of Common Stock, as of January 31,
1994. On that date, the Directors, nominees and executive officers of Mercshares
as a group owned beneficially 602,892 shares or 1.3% of the shares of Common
Stock outstanding. As to certain shares, the Directors, nominees and executive
officers had no voting or investment power but the shares were included above
because of ownership by family members or trusts for their benefit. As to the
shares reported above with respect to which the Directors, nominees and
executive officers had or shared voting or investment power, they had sole
voting and investment power as to 551,504 shares of Common Stock and shared
voting and investment power as to 28,300 shares of Common Stock.
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<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OVERALL POLICY
The Board of Directors of Mercshares establishes the overall goals and
objectives of Mercshares, and the policies to be followed in pursuing these
goals and objectives, including the selection of necessary key management
personnel, and the auditing of the performance of those personnel. The major
responsibility for assisting in satisfying the compensatory aspect of the
overall supervisory duty of the Board rests with the Compensation Committee. The
membership of the Compensation Committees (collectively the "Committee") of
Mercshares and Merc-Safe, its leading bank affiliate, is identical, composed of
independent non-employee directors of both institutions who do not participate
in any executive compensation plan. All executive officers of Mercshares are
officers of Merc-Safe.
In order to achieve the overall goals and objectives of Mercshares, and
recognizing the interest of the shareholders in that achievement, the Committee,
over a number of years, has developed and maintained an executive compensation
plan based on a philosophy that links executive compensation both to individual
and corporate performance, and return to shareholders. This philosophy enables
Mercshares to attract and retain highly motivated executive personnel of
outstanding ability and initiative, and to create an identity of interests
between executives and Mercshares shareholders. Mercshares' executive
compensation plan consists of basic cash compensation, the opportunity for
annual incentive compensation based on corporate performance, and continuing
stock based compensation, geared to corporate performance. Although Mercshares
is well aware that its stock price is subject to the vagaries of the market, and
is not necessarily reflective of its sound corporate performance, Mercshares
believes that stock based compensation creates another direct link between its
executives and its shareholders since such compensation has value only if there
is appreciation in Mercshares' stock price.
The Committee administers the provisions of Mercshares' incentive cash
bonus plan and its stock based plans, which are applicable to all affiliates of
Mercshares. In addition, the Committee is authorized to make recommendations to
the Boards of Mercshares and its affiliates with respect to basic salaries,
supplemental pension, deferred compensation, employment and similar agreements
affecting their executive officers, and performs such other functions as may be
delegated to it by the Boards.
The Committee takes various factors into consideration when establishing
and reviewing executive compensation. There follows an explanation of annual
incentive compensation which is governed by a pre-existing mathematical formula,
stock based compensation which currently consists of existing awards, and the
factors considered in establishing basic cash compensation.
BASIC CASH COMPENSATION
The Committee, in determining basic cash compensation of the executive
officers of Mercshares, considers corporate profitability, financial condition,
capital adequacy, return on assets and the planned compensation budget for
Mercshares. The Committee also considers the performance and compensation levels
of other banking institutions as more fully set forth under the caption "1993
Compensation". The Committee does not consider these factors by any formula and
does not assign specific weight to any given factor. Instead, the Committee
applies its collective business judgment to reach a consensus on compensation
fair to Mercshares, its shareholders and its executive officers. Under
employment agreements, the basic cash compensation of Messrs. Baldwin, Dodge,
Dunn and Topping for any year may not be less than basic cash compensation for
the prior year.
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<PAGE>
ANNUAL INCENTIVE COMPENSATION
In addition to basic cash compensation, the Committee, in 1981, developed
an annual incentive compensation plan, which is based on a preset mathematical
formula tied directly to corporate performance and profitability.
Forty-four executives of Merc-Safe and its affiliates who are considered by
the Committee to have responsibilities that directly affect corporate
performance and profitability currently participate in the incentive
compensation Plan. Participants in the Plan are chosen annually by the
Committee. The Plan has both a long-term and a short-term incentive effect
inasmuch as no annual awards are made unless a compounded rate of growth in
earnings per share of Mercshares, and/or in net operating income of the
affiliate (or unit) employing the participant, in excess of five percent per
annum is maintained from the Base Year of the Plan. The maximum potential annual
award is subject to attaining a 15 percent annual improvement in such earnings
per share or net operating income. For 1993, the maximum potential annual award
was generally 30 percent of a participant's salary (60 percent in the case of
the Chief Executive Officer and 45 percent in the case of the next three most
highly compensated officers of Mercshares). However, because Management of
Mercshares's affiliates is decentralized, not more than one half of any
potential award is based on improvement in Mercshares' earnings per share, and
not more than one half is based on improvement in net operating income of the
appropriate affiliate (or unit). No executive officer of Mercshares received
incentive compensation attributable to 1991 earnings per share and net operating
income since the threshold criteria were not met in 1991. Incentive cash bonuses
attributable to 1992 and 1993 earnings per share and net operating income were
paid, as reflected under the caption "Bonus" in the Summary Compensation Table
for those years.
STOCK BASED COMPENSATION
The Executive Stock Appreciation Rights Plan, approved in 1986, the 1985
Stock Option Plan, and the Omnibus Stock Plan, approved in 1990, are Mercshares'
stock based compensation plans designed to create a common interest between
executives and shareholders on a long-term basis. The purpose of these Plans is
to encourage participants to maintain and increase their proprietary interest as
shareholders in Mercshares and to benefit from the long-term performance of
Mercshares.
Under the Executive Stock Appreciation Rights Plan, stock appreciation
rights, based on the market price of the stock on the date of grant, were
granted by the Committee to key executive officers including Messrs. Baldwin,
Dodge, Dunn, Topping and O'Connor, and under the 1985 Stock Option Plan, stock
options, based on the market price of the stock on the dates of grant, were
issued by the Committee to Messrs. Dunn and O'Connor, and to other key
employees. Rights were last granted under the Executive Stock Appreciation
Rights Plan in 1989 and no rights remain available for issuance. Options under
the 1985 Stock Option Plan were last granted in 1989 and the Committee currently
does not intend to issue additional options under that Plan, although options
are available for issuance.
On February 27, 1991, stock options, without tandem stock appreciation
rights, were granted by the Committee under the Omnibus Stock Plan to 63 key
employees, including the executive officers of Mercshares. Twenty-five percent
of these options are exercisable on and after each of the first four anniversary
dates of the grant. However, the portion of the options that become exercisable
in each of the four years may not be exercised unless corporate earnings per
share increase at a compound growth rate of five percent from a base year,
generally the fiscal year immediately preceding the grant date. If this test is
met, then up to one-half of the options maturing in each of the four years
become exercisable based on a sliding scale (beginning at five percent) of
earnings increases of Mercshares over the prior year earnings per share. The
remaining one-half may be exercised only if the net operating income of the
affiliate employing the participant (or unit of that affiliate to which the
participant is assigned) increased at a compounded growth rate of at least five
percent from a base year. If this test is met, then up to one-
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<PAGE>
half of the options maturing in each of the four years become exercisable, based
on the same sliding scale (beginning at five percent), tied to the percent
increase in prior year net operating income of that affiliate (or unit). To the
extent that these tests are not met, all, or a portion of the options are
forfeited and become available for further grants. Options that might have
become exercisable in 1992, 1993 and 1994 were forfeited because the preset
tests were not met.
1993 COMPENSATION
The Committee, in determining the 1993 basic cash compensation of the
executive officers of Mercshares, considered the factors described in this
report.
H. Furlong Baldwin is Chairman of the Board and Chief Executive Officer of
Mercshares and Merc-Safe and, as such, has the ultimate management
responsibility for the strategic direction, performance, operating results and
financial condition of Mercshares and its affiliates, and the carrying out of
corporate policies and procedures. Since 1970, these duties have included the
primary responsibility for recommending to the Board of Mercshares the
acquisition and establishment of additional affiliates. Douglas W. Dodge, as
Vice Chairman of the Board of Mercshares and President and Chief Operating
Officer of Merc-Safe, Edward K. Dunn, Jr., as President of Mercshares and a Vice
Chairman of the Board of Merc-Safe, and Brian B. Topping as Vice President of
Mercshares and a Vice Chairman of the Board of Merc-Safe, have the
responsibility of assisting in carrying out corporate policies and procedures to
assure that the performance, operating results and financial condition
objectives are attained. Mr. O'Connor, as Senior Vice President and Secretary of
Mercshares and Merc-Safe has the responsibility of chief legal officer, as well
as Corporate Secretary.
The 1993 basic cash compensation of Messrs. Baldwin, Dodge, Dunn and
Topping was set in February, 1993. The Committee was aware that incentive
compensation payments to the executive officers of Mercshares would be made in
1993 attributable to 1992 performance under the Annual Incentive Compensation
Plan, and that twenty-five percent of the options granted under the Omnibus
Stock Plan in 1991 potentially exercisable in 1993, were forfeited, because the
earnings goals established in that Plan were not reached. In addition, no awards
were made in 1992 under the 1985 Stock Option Plan or the Omnibus Stock Plan.
The Committee reviewed profitability and capital strength ratios (return on
assets, equity to assets and return on equity) and loan loss performance ratios
(year-end non-performing assets to loans, net charge-offs to average loans,
year-end allowance to loans and year-end allowance to non-performing loans) for
the years 1988 through 1992 as compared to comparable information for thirty-one
banking companies with assets from $5 to $10 billion, considered by an
independent analyst as Mercshares' peer group. The Committee was aware that
Mercshares had been ranked, by that independent analyst, first in the equity to
asset ratio, second based on return on assets and eleventh in return on equity
in 1991, (the then most current ranking), and that, for the third quarter, 1992
(the then most recent quarter), Mercshares was rated "superior", compared to
four other Maryland banks, based on thirty-nine separate financial ratios that
depict financial strength and profitability compiled by IDC Financial
Publishing, Inc.
The Committee then compared the compensation of Messrs. Baldwin, Dodge,
Dunn and Topping with the compensation of executive officers of five banking
institutions, based on 1991 and 1992 proxy information (the then most currently
available), selected as generally comparable to Mercshares in terms of criteria
including the nature and quality of operations, or geographic proximity. This
group included financial institutions having significant income generated by
trust and investment activities, high returns on assets and above average return
on equity, capital significantly in excess of that required by current federal
regulations, and located within a 400 mile radius of Baltimore so as to include
companies operating in a comparable economic climate. No target was established
in the comparison with this group of institutions.
The Committee concluded that Mercshares' profitability and capital strength
ratios were strong, and that loan loss ratios were favorable, both standing
alone and in comparison to the
10
<PAGE>
thirty-one banking companies constituting the peer group and that Mershares'
performance, overall, was satisfactory. The Committee determined that, in view
of the compensation comparison stated above and the fact that no increase in
base compensation had been granted in 1992, an increase in base compensation
should be granted and recommended to the Board for approval, the increase
reflected in the Summary Compensation Table. The travel allowance for Mr.
Baldwin (as disclosed in the Summary Compensation Table), which has been
recommended by the Committee and approved by the Boards annually since 1990 as
an appropriate corporate expense, was continued. The compensation of Mr.
O'Connor was reviewed in June, 1993, and he was awarded an increase generally in
line with the average increases of other officers of Merc-Safe earning
comparable amounts.
No awards were made in 1993 under the 1985 Stock Option Plan or the Omnibus
Stock Plan.
In February, 1993, the Committee designated Messrs. Baldwin, Dodge, Dunn,
Topping and O'Connor as participants for 1993 in the Annual Incentive
Compensation Plan. Under the formula requirements of that Plan, based on 1993
earnings per share and net operating income and to the extent that mathematical
Plan criteria were met, these five individuals earned incentive cash
compensation, paid in 1994, which is included under the caption "Bonus" in the
Summary Compensation Table for 1993.
Mr. Donald J. Shepard became a member of the Committee in April, 1993,
replacing a prior Committee member who retired from the Board of Directors, and
therefore Mr. Shepard did not participate in the determination of 1993
compensation for Messrs. Baldwin, Dodge, Dunn and Topping.
Mercshares has not adopted a policy with respect to qualifying compensation
paid to its executive officers for deductibility under Section 162(m) of the
Internal Revenue Code since no executive officer currently receives, or has
previously received, taxable compensation in excess of $1,000,000 per year.
THE COMPENSATION COMMITTEE
Robert D. Kunisch Morris W. Offit
Christian H. Poindexter Donald J. Shepard
Calman J. Zamoiski, Jr.
Chairman
The following line graph compares cumulative total shareholder return on
Mercshares Common Stock with the Standard & Poor's 500 Index and the Standard &
Poor's Banks Composite Index for the period beginning December 31, 1988, through
December 31, 1993. The graph assumes $100 invested at the closing price on
December 31, 1988, and the reinvestment of all dividends. None of the thirty-one
institutions considered as peer institutions of Mercshares, and one of the five
institutions considered for compensation purposes are included in the S & P
Banks Composite Index, which consists, as of December 31, 1993, of six "Money
Center Banks", seventeen "Major Regional Banks" and three "Other Banks", each of
which is substantially larger than Mercshares.
11
<PAGE>
PERFORMANCE GRAPH
(The Performance Graph is not included in this electronic submission.
Presented below is the table of data points used in the graph as required by
Rule 304(d) of Regulation S-T.)
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
Mercshares.............. $100.00 $144.46 $121.76 $175.17 $211.64 $190.13
S&P Banks Composite
Index................. $100.00 $122.97 $86.80 $140.23 $186.29 $206.82
S&P 500................. $100.00 $131.21 $126.89 $165.43 $178.03 $195.99
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
Merc-Safe has banking and other relationships, in the ordinary course of
business, with a number of its Directors and companies associated with them,
including loans to Mr. Zamoiski and Mr. Poindexter and companies associated with
them. Such loans were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with others, and did not involve more than the normal risk of
collectibility or present other unfavorable features. Mr. Baldwin is a director
of Baltimore Gas & Electric Company of which Mr. Poindexter is an executive
officer, and of OFFITBANK of which Mr. Offit is an executive officer and Mr.
Dunn is a director and member of the compensation committee of Aegon USA, Inc.
of which Mr. Shepard is an executive officer.
12
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain summary compensation information as
to the Chief Executive Officer of Mercshares, and as to the other four most
highly compensated executive officers of Mercshares, based on total annual
salary and bonus in 1993.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------------- -------------
NAME AND OTHER ANNUAL OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) SARS(#)(1) COMPENSATION($)(2)
- ----------------------------------- --------- --------- --------- ---------------- ------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
H. Furlong Baldwin................. 1993 648,900 253,100 55,200(3) -- 30,200
Chairman of the Board 1992 600,000 36,000 53,400(3) -- 27,700
and Chief Executive Officer 1991 595,800 -- -- 150,000 --
Douglas W. Dodge................... 1993 448,000 133,400 -- -- 24,400
Vice Chairman of the Board 1992 400,000 12,200 -- -- 22,600
1991 398,300 -- -- 90,000 --
Edward K. Dunn, Jr................. 1993 348,800 105,200 -- -- 12,800
President 1992 300,000 9,000 -- -- 12,100
1991 299,000 -- -- 67,500 --
Brian B. Topping................... 1993 348,800 32,400 -- -- 19,900
Vice President 1992 300,000 54,900 -- -- 16,800
1991 299,000 -- -- 67,500 --
John A. O'Connor, Jr............... 1993 157,200 32,600 -- -- 11,700
Senior Vice President 1992 150,000 4,600 -- -- 11,100
and Secretary 1991 135,200 28,500 -- 18,000 --
</TABLE>
- ---------------
(1) Stock Options granted in 1991. The number of options are adjusted to reflect
the 3 for 2 stock dividend paid on Common Stock in 1993. Of the amount
shown, 75% have been forfeited because required earnings per share of
Mercshares were not achieved.
(2) Represents cost of group-term life insurance deemed to be employee income
under the Internal Revenue Code and contributions made on behalf of the
executive officer by Merc-Safe to the Mercshares Thrift Plan and to
supplemental thrift plan arrangements as follows:
<TABLE>
<CAPTION>
SUPPLEMENTAL
YEAR LIFE INSURANCE THRIFT PLAN THRIFT PLAN TOTAL
--------- --------------- ----------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Mr. Baldwin.................................... 1993 $ 6,300 $ 7,100 $ 16,800 $ 30,200
1992 6,300 6,900 14,500 27,700
Mr. Dodge...................................... 1993 6,300 10,100 8,000 24,400
1992 6,300 9,900 6,400 22,600
Mr. Dunn....................................... 1993 2,700 10,100 -- 12,800
1992 2,200 9,900 -- 12,100
Mr. Topping.................................... 1993 4,000 10,100 5,800 19,900
1992 4,100 9,900 2,800 16,800
Mr. O'Connor................................... 1993 3,800 7,900 -- 11,700
1992 3,600 7,500 -- 11,100
</TABLE>
(3) Of these amounts $47,900 in 1993 and $46,200 in 1992 represent travel
expenses incurred by Mr. Baldwin.
Because of transition provisions in SEC reporting rules adopted in 1991,
certain 1991 information is not presented as to one executive officer under
"Other Annual Compensation" or as to all named executive officers under "All
Other Compensation".
AGGREGATE OPTIONS/SAR TABLE
The following table sets forth certain information, on an aggregate basis,
concerning the exercise of stock appreciation rights and stock options during
1993 by each of the executive
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<PAGE>
officers named in the Summary Compensation Table, and the December 31, 1993,
value of unexercised stock appreciation rights and stock options. Stock
appreciation rights have value only to the extent that the market value per
share of Mercshares Common Stock exceeds, on the date of exercise, the market
value per share on the date of grant. As is explained in the Report of the
Compensation Committee, and in the description of the Omnibus Stock Plan
following this table, those stock options described as "unexercisable" stock
options were granted pursuant to that Plan and will have value only if certain
earnings per share of Mercshares, and net operating income of its affiliates,
are achieved.
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY--END OPTION/SAR VALUES
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
AT FY--END (#) AT FY-END ($S)(1)
SHARES ACQUIRED VALUE REALIZED ------------------------------ -------------------------------
NAME ON EXERCISE (#) ($S)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------- ----------------- ---------------- ------------- --------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Baldwin(2)...... -- $ -- 75,000 37,500 $ 360,000 $ 160,875
Dodge(3)........ 3,528 172,500 22,500 22,500 108,000 96,525
Dunn(4)......... -- -- 30,000 16,875 144,000 72,394
Topping(5)...... -- -- 30,000 16,875 144,000 72,394
O'Connor(6)..... 2,416 90,000 -- 4,500 -- 19,305
<FN>
- ---------------
(1) The number of shares, options and SARs in the table and the following notes
have been adjusted to reflect the 3 for 2 stock dividend paid on Common
Stock in 1993. Share values included in the table represent the fair market
value of the shares at the exercise date for exercised options and SARs, or
at December 31, 1993, for unexercised options and SARs, less the exercise
price of options or the base price of SARs. SAR exercises may be settled in
stock, cash, or both, in the discretion of the Compensation Committee.
(2) As of December 31, 1993, the table includes Mr. Baldwin's ownership of
75,000 exercisable SARs and 37,500 unexercisable options.
(3) Mr. Dodge, in 1993, exercised 22,500 SARs having a value realized of
$172,500, which he received in the form of 3,528 shares of common stock and
a cash payment of $94,884. As of December 31, 1993, the table includes Mr.
Dodge's ownership of 22,500 exercisable SARs and 22,500 unexercisable
options.
(4) As of December 31, 1993, the table includes Mr. Dunn's ownership of 30,000
exercisable SARs and 16,875 unexercisable options.
(5) As of December 31, 1993, the table includes Mr. Topping's ownership of
30,000 exercisable SARs and 16,875 unexercisable options.
(6) Mr. O'Connor, in 1993, exercised 11,250 SARs having a value realized of
$90,000, which he received in the form of 2,416 shares of common stock and a
cash payment of $36,031. As of December 31, 1993, the table includes Mr.
O'Connor's ownership of 4,500 unexercisable options.
</TABLE>
STOCK PLANS
EXECUTIVE STOCK APPRECIATION RIGHTS PLAN
The 1985 Executive Stock Appreciation Rights Plan was approved by the
stockholders at a meeting held April 30, 1986. The plan permits the issuance of
stock appreciation rights to senior executives of Mercshares and its affiliates
as determined by the Compensation Committee. Each right gives the holder the
right to receive, subject to the provisions of the plan, an amount of stock,
cash or a combination of stock and cash, equal to any appreciation (between the
time of grant and the time of exercise of the right) in the fair market value of
one share of Common Stock. Thus, if the fair market value per share of Common
Stock is $20.00 on the date the right is issued and, on the date of exercise of
the right, the fair market value per share is $25.00, then the holder of the
right would be entitled to receive appreciation of $5.00 for each right held.
The Compensation Committee determines what, if any, portion of the appreciation
is to be paid in cash. Shares issued in payment are issued at the fair market
value on the date of exercise. SARs
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<PAGE>
held by the named executive officers as of December 31, 1993, are described in
the Aggregate Option/SAR table as "exercisable" SARs.
1985 STOCK OPTION PLAN
The 1985 Stock Option Plan was approved by the stockholders at a meeting
held April 30, 1986. The Plan permits the Compensation Committee to grant to key
employees of Mercshares and its affiliates, as determined by the Committee,
incentive stock options (which provide certain tax advantages for optionees who
comply with applicable holding periods). The exercise price of all options
granted under the 1985 Stock Option Plan is not less than the fair market value
of the Common Stock on the date of grant. Options have been granted to over 200
officers and employees. No options under the 1985 Stock Option Plan have been
granted to Messrs. Baldwin, Dodge or Topping. Options under this plan that were
granted to Mr. Dunn have been exercised and the options granted to Mr. O'Connor
have expired.
OMNIBUS STOCK PLAN
The Omnibus Stock Plan was approved by the stockholders at a meeting held
April 25, 1990. The Omnibus Stock Plan is intended to supplement and ultimately
replace the 1985 Executive Stock Appreciation Rights Plan and the 1985 Stock
Option Plan, since under such plans, the rights issuable are fully depleted and
options issuable have nearly been depleted.
The Omnibus Stock Plan permits the Compensation Committee from time to time
to grant incentive stock options, non-qualified stock options, stock
appreciation rights, restricted stock and phantom stock units ("Stock
Incentives") to key employees of Mercshares and its affiliates as determined by
the Compensation Committee. The Compensation Committee has broad authority to
determine the terms and conditions upon which such Stock Incentives may be
granted, including, among other things, when they may be granted, their duration
and conditions for their exercise and forfeiture.
In 1991, 771,000 Stock Incentives, in the form of stock options, without
tandem stock appreciation rights, were granted to 63 key employees of Mercshares
and its affiliates. No other form of Stock Incentives have been granted. To the
extent permitted by law and regulations, the options granted are intended to be
incentive stock options. The remaining options are non-qualified. The exercise
(option) price is $14.83 per share, the closing price of Mercshares' Common
Stock on the date of the grant, as adjusted to reflect the 3 for 2 stock
dividend paid on Common Stock in 1993, and the term of the option is ten years.
Generally, up to twenty-five percent of the options become exercisable on and
after the first anniversary date of the grant, and an additional twenty-five
percent become exercisable on and after each of the next three anniversary dates
(all options are exercisable on and after the fourth anniversary date), provided
that, if certain earnings per share of Mercshares, and net operating income of
the affiliate (or unit thereof) employing the optionee, are not achieved, all or
a portion of the options that become exercisable will be forfeited and available
for further grants to key employees. Stock Options under this Plan have been
granted to the named executive officers, and those currently outstanding are
shown in the Aggregate Option/SAR table and are described therein as
"unexercisable" stock options. Seventy-five percent of the options granted have
been forfeited.
RETIREMENT AGREEMENTS AND PLANS
DEFERRED COMPENSATION AND SUPPLEMENTAL PENSION AGREEMENTS
Messrs. Baldwin, Dodge and Topping have entered into arrangements with
Merc-Safe pursuant to which their rates of salary were reduced. In exchange,
Merc-Safe intends from time to time to invest certain amounts (approximately the
aggregate cumulative salary reduction for the period
15
<PAGE>
prior to their respective retirements) in various life insurance and annuity
plans and to make future payments to them which will approximate the amounts
realized from these investments. The amount and term of future payments to them
will vary according to their age at retirement. Alternate provisions have been
made for events such as termination, resignation, death or disability prior to
retirement, but, assuming retirement at age 65, annual payments for a minimum of
fifteen years or until death would approximate $168,000 to Mr. Baldwin, $126,000
to Mr. Dodge, and $176,000 to Mr. Topping (all of which are expected to be
funded by the insurance and annuity plan arrangements). In connection with this,
they will participate in supplemental pension and thrift plan arrangements
whereby they will be eligible to receive (1) benefits in the amounts they would
have received had their compensation not been reduced from current levels, and
(2) amounts to which they would have been entitled under the Mercshares cash
balance plan and thrift plan but for the maximum salary, benefit and
contribution limitations on defined benefit and contribution plans under the
Internal Revenue Code. The amounts deferred in 1993 are included under the
caption "Salary" in the Summary Compensation Table. Mercshares has entered into
a Supplemental Pension Agreement with Mr. Dunn, pursuant to which, assuming
retirement at age 65, Mr. Dunn will receive $5,000 per month in addition to any
pension received under the Mercshares Pension Plan. Alternate provisions are
made for events such as termination, resignation, death or disability prior to
retirement at age 65.
PENSION PLAN
Mercshares is sponsor of an employees' cash balance pension plan which all
of its affiliates have adopted. Each plan participant who was employed on
January 1, 1991 (including those individuals named below) was credited under the
cash balance plan with a frozen accrued benefit representing the benefit he had
earned under the plan, determined as of December 31, 1990, and based generally
on past service and career average annual compensation. For service on and after
January 1, 1991, the cash balance plan is designed to maintain separate
participant accounts for each eligible employee. These cash balance accounts are
credited with annual contribution allocations equal to various percentages of
compensation based on years of credited service and age. Interest allocations,
tied to a Treasury Bill rate, are also credited annually to these cash balance
accounts. Plan benefits paid at retirement to those individuals named below, all
of whom were employed on December 31, 1990, will be paid in annuity form and
will consist of the sum of their frozen accrued benefits and their cash balance
accounts. The Plan does not determine benefits primarily by final average
compensation.
At the plan's normal retirement age of 65, the individuals named below
would have the following years of service and estimated annual pension benefits:
Mr. Baldwin, 40 years and $452,000; Mr. Dodge, 27 years and $222,000; Mr. Dunn,
12 years and $110,000; Mr. Topping, 24 years and $177,000 and Mr. O'Connor, 25
years and $63,000. The amounts shown are the estimated payment from the plan for
Mr. O'Connor and the total of estimated payments from the plan and under the
supplemental pension arrangements described above for Messrs. Baldwin, Dodge,
Dunn and Topping.
Estimated annual pension benefits shown above are presented as straight
life annuities for current compensation (including bonus), based on compensation
paid in 1993, modified for increases in salary through date of normal retirement
based on the plan's internal salary increase assumption. Actual salary increases
may differ from such assumption. In addition, maximum salary and pension
benefits are limited by the provisions of the Internal Revenue Code, and
retirees may elect to receive a form of benefit other than a straight life
annuity. Accordingly, the actual pension benefits at retirement may differ
significantly from the amounts stated above.
All other officers of Mercshares participate in the cash balance plan.
Directors who are not also officers of Mercshares or an affiliate do not
participate in the cash balance plan.
16
<PAGE>
THRIFT AND MEDICAL REIMBURSEMENT PLANS
Mercshares is sponsor of a thrift plan, of the type described in Section
401(k) of the Internal Revenue Code, which a majority of its affiliates have
adopted for the benefit of all eligible employees. Those executive officers of
Mercshares who are also officers of Merc-Safe participate in the plan. The plan
provides that corporate contributions, based on a percentage of an employee's
salary, are paid to the employee's thrift plan account. Additionally, employees
may elect to defer up to 10% of their salaries by redirecting the deferred
amount to their thrift plan accounts, in which case their employers match a
portion of the amount deferred. The corporate contributions for 1993 are
included under the caption "All Other Compensation" in the Summary Compensation
Table. Additionally, Messrs. Dodge, Dunn, Topping and O'Connor elected to defer
a percentage of their salaries during 1993. The amounts so deferred are included
under the caption "Salary" and the matching contributions are included under the
caption "All Other Compensation" in the Summary Compensation Table.
Mercshares is sponsor of a medical reimbursement plan, of the type
described in Section 105 of the Internal Revenue Code, which a majority of its
affiliates have adopted for the benefit of all eligible employees. Those
executive officers of Mercshares who are also officers of Merc-Safe, except Mr.
Baldwin, participate in the plan. The plan provides that employees may reduce
their salaries on a pre-tax basis, in amounts determined in advance by them, and
redirect those amounts to a medical reimbursement account (MRA). Funds in the
MRA then become available to reimburse the employee for certain uninsured
medical expenses. Any balance left in an employee's MRA at year end reverts to
his employer. Salary reductions under the plan for Messrs. Dodge, Dunn, Topping
and O'Connor are included under the caption "Salary" in the Summary Compensation
Table.
OTHER ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Mercshares and Merc-Safe have entered into employment agreements with
Messrs. Baldwin, Dodge, Dunn, and Topping. Pursuant to these agreements, Mr.
Baldwin serves as Chairman of the Board and Chief Executive Officer of
Mercshares and Merc-Safe at a base salary of not less than $650,000 per year;
Mr. Dodge serves as Vice Chairman of the Board of Mercshares and President and
Chief Operating Officer of Merc-Safe at a base salary of not less than $450,000
per year; Mr. Dunn serves as President of Mercshares and a Vice Chairman of the
Board of Merc-Safe at a base salary of not less than $350,000 per year, and Mr.
Topping serves as Vice President of Mercshares and a Vice Chairman of the Board
of Merc-Safe at a base salary of not less than $350,000 per year. The agreements
provide that these base salaries will not be less in any year than in the
preceding year. The current terms of the agreements are until March 31, 1996,
for Mr. Baldwin, March 31, 1996, for Mr. Dodge, December 31, 1996, for Mr. Dunn,
and March 31, 1996, for Mr. Topping. These agreements will extend for periods of
three years following each annual anniversary date (but not beyond the normal
retirement date of the employee) unless such extension is declined by Mercshares
or Merc-Safe or by Messrs. Baldwin, Dodge, Dunn or Topping, respectively.
Messrs. Baldwin, Dodge, Dunn and Topping will also be entitled to such other
benefits as they may receive under various employee benefit plans including the
plans described in this Proxy Statement.
CHANGE OF CONTROL TERMINATION AGREEMENTS
Mercshares has entered into Change of Control Termination Agreements with
Messrs. Baldwin, Dodge, Dunn, Topping and O'Connor. In the event that during the
effective period of the agreement, following a "change of control" of
Mercshares, the officer is terminated (prior to his normal retirement date)
within three years of a change of control without "cause" or if the officer
17
<PAGE>
resigns for "good reason", then such officer is entitled to receive certain cash
payments from Mercshares. Payments which may be made under the agreements are
limited to the maximum amount (when combined with amounts otherwise payable upon
termination) which is deductible by Mercshares under Section 280G of the
Internal Revenue Code. Generally, the maximum amount deductible is three times
average base annual compensation (including salary, bonus, fringe benefits and
deferred compensation) over the last five years. The Change of Control
Termination Agreements now have a three year effective period following December
31, 1993, and are renewed automatically each year for an additional one year
period (or until the officer's normal retirement if earlier) unless Mercshares
refuses such extension. For the purposes of the agreements, a "change of
control" means any of the following occurrences: (a) a person or group becomes
the beneficial owner of at least 20% of Mercshares Common Stock; (b) there occur
certain specified changes in the composition of the Mercshares Board of
Directors; (c) Mercshares' stockholders approve a reorganization, merger,
consolidation or statutory share exchange of Mercshares unless after such
transaction, holders of the previously outstanding Mercshares Common Stock own
more than 50% of the combined voting power of the surviving entity, or (d) a
liquidation or dissolution of Mercshares or sale of all or substantially all of
the assets of Mercshares. For purposes of these Agreements, termination by
Mercshares for "cause" means termination upon (i) an act of personal dishonesty
taken by the officer intended to result in substantial personal enrichment of
the officer at the expense of Mercshares, (ii) the officer's willful, deliberate
and continued failure to perform substantially his duties, which is not remedied
after receipt of written notice, or (iii) conviction of a felony. "Good reason"
includes the assignment to the officer of any duties inconsistent with his
status and position as they exist immediately prior to the change of control, a
substantial failure by Mercshares to comply with its obligations to the officer
under its employment arrangement with such officer, relocation of the officer's
place of employment outside of the Mercshares principal office located in the
City of Baltimore, a purported termination of the officer not otherwise
permitted under his employment arrangement with Mercshares or the failure of any
successor to Mercshares to assume expressly the obligations of the agreement.
DIRECTOR FEES
Directors of Mercshares, who are not also officers of Mercshares or its
affiliates, are paid a retainer at the annual rate of $12,500 in addition to
fees of $750 for each Board meeting and $300 for each Committee meeting
attended. Directors who are also officers of Mercshares or its affiliates
receive no compensation for attendance at Board or Committee meetings of
Mercshares. Mercshares is sponsor of a Directors Deferred Compensation Plan
which gives Directors of Mercshares and participating affiliates, who are not
also officers of Mercshares, the option to defer the retainer and portions, or
all, of their fees. The amount of these fees is invested by Merc-Safe, as agent,
and, together with interest earned through investment, is credited to the
Director's deferred compensation account to be paid to the Director following
the time he ceases to render services as a Director.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
Certain affiliated banks have had, and expect to have in the future,
banking and trust transactions in the ordinary course of business with many of
the Directors (or nominees) and officers of Mercshares, and certain of their
associates and immediate family members, on substantially the same terms,
including interest rates and collateral on loans, and commissions on fiduciary
business, as those prevailing at the time for comparable transactions with
others. Loans to such persons were made in the ordinary course of business and
did not involve more than the normal risk of collectibility or present other
unfavorable features.
18
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors, acting upon the recommendation of the Audit
Committee, has appointed Coopers & Lybrand, certified public accountants, as the
principal auditors for Mercshares for 1994. The stockholders are asked to ratify
that appointment.
A representative of Coopers & Lybrand is expected to be present at the
Annual Meeting of Stockholders, with the opportunity to make a statement if the
representative desires to do so, and will respond to appropriate questions from
stockholders.
If the stockholders do not ratify the appointment of Coopers & Lybrand,
other independent certified public accountants will be selected by the Board
upon recommendation of the Audit Committee.
The Board of Directors recommends a vote FOR the proposal to ratify the
appointment of Coopers & Lybrand as independent certified public accountants to
audit the financial statements of Mercshares for 1994.
APPROVAL OF ANNUAL INCENTIVE COMPENSATION PLAN
As reported in previous Proxy Statements, Mercshares has an Annual
Incentive Compensation Plan (the "Plan"). This Plan was adopted by the Board of
Directors on December 8, 1981, effective as of January 1, 1981 and, with
subsequent amendments, has been in effect since that date. The Plan, as
currently amended is described below and is set forth in Exhibit I to this Proxy
Statement and reference is made to that Exhibit for a complete statement of its
terms and provisions.
Stockholder approval of the Plan is proposed in order to assure the future
deductibility for Federal income tax purposes of executive compensation under
the recently adopted provisions of Section 162(m) of the Internal Revenue Code.
At present, Section 162(m) limits the deductibility of certain compensation in
excess of $1,000,000 for the chief executive officer and any other executive
officer named in the proxy statement. No executive officer of Mercshares is
compensated at that level. Nonetheless, stockholder approval of the plan is
sought to assure that limitations such as those in Section 162(m) will not
disqualify possible Plan compensation from being deductible in the future.
The Plan is administered by the Compensation Committee which consists of
five members of the Board of Directors, all of whom are independent non-employee
directors of Mercshares who do not participate in any executive compensation
plan of Mercshares. None of the members of the Compensation Committee is a
current employee of Mercshares, or a former employee of Mercshares who receives
compensation for prior services, nor does he receive remuneration other than as
a director.
The purpose of the Plan is to increase the profitability of Mercshares and
its affiliates by providing an opportunity for certain key executive employees,
whose efforts are deemed by the Compensation Committee to have a direct impact
on earnings, to earn incentive cash payments for outstanding ability,
achievement and performance, and thereby to participate in the overall
profitability of Mercshares.
The maximum potential award is 33 percent of a participant's salary for
Class III participants (65 percent for a Class I participant who, for 1993, was
the Chief Executive Officer, and 50 percent for Class II participants who, for
1993, were the next three most highly compensated officers of Mercshares), with
not more than one-half of any potential award based on improvement in earnings
per share of Mercshares and not more than one-half based on improvement in net
operating income of the affiliate employing the participant (or division
thereof), as is shown on Exhibit "A" to Exhibit I. Salary is defined as the
participant's base rate of pay for the calendar year preceding the calendar year
for which any award may be made (the "Award Year"). No
19
<PAGE>
participant is eligible to receive an award in excess of $750,000 for any one
calendar year. For 1993, there were forty key executive officers of Mercshares
and its affiliates who were Class III participants.
Prior to December 31 of the year preceding an Award Year, the Compensation
Committee selects the participants in the Plan for the Award Year, designates
the participant as a Class I, Class II or Class III participant, determines
whether the portion of the participant's award attributable to net operating
income shall be based on the total net operating income of the affiliate
employing the participant, or the net operating income of a particular division
of the affiliate and designates a Base Year. Participants are classified as
Class I, Class II, or Class III participants depending upon and in recognition
of their varying corporate responsibilities.
The Base Year (currently 1985 ) and Preceding Year (1992 for the 1993 Award
Year) earnings per share are as reported in the relevant Annual Report to
Shareholders, and the Base Year and Preceding Year net operating income are as
reported for the relevant year to the Mercshares Board of Directors. While the
Base Year and Preceding year earnings per share and net operating income can be
estimated early in the Award Year, such estimates are adjusted, as necessary
during the Award Year, to reflect mergers, acquisitions, stock dividends,
intercorporate and intracorporate transfers of operations or operating divisions
and other corporate changes. For example, the Base Year (1985) and Preceding
Year (1992) earnings per share for the 1993 Award Year have been adjusted to
reflect the 3 for 2 stock dividend paid on the Common Stock on September 30,
1993.
Prior to March 1 of the year following the Award Year, the Compensation
Committee approves payment of any incentive compensation awards attributable to
the Award Year earnings performance based on the preset mathematical formula
generally described below and set forth in detail in Exhibit I, after receipt by
the Compensation Committee of confirmation of such Awards by Mercshares'
independent certified public accountants.
Under the Plan, no incentive compensation awards are made unless a
compounded rate of growth in earnings per share of Mercshares, and/or in net
operating income of the affiliate employing the participant (or division
thereof), in excess of five percent per annum is maintained from the Base Year
of the Plan. If the compounded rate of growth in earnings per share, and/or net
operating income exceeds five percent, the participant receives an incentive
compensation award based upon the percent increase in earnings per share and/or
net operating income over the Preceding Year, with the maximum potential award
subject to attaining a 15 percent annual growth, as shown in Exhibit "B" to
Exhibit I. Incentive awards paid to the five most highly compensated executive
officers of Mercshares in 1994 attributable to 1993 earnings per share and net
operating income are included in the amounts shown in the "Bonus" column of the
Summary Compensation Table.
The following table shows awards paid in 1994 attributable to 1993 earnings
per share of Mercshares and net operating income of the affiliate, or division
thereof. Directors who are not also officers of Mercshares or an affiliate do
not participant in the Plan. For 1993, participants include all officers of
Mercshares (9 persons) and at least one person from each banking affiliate and
from Mercantile Mortgage Corporation (35 persons). All participants are Class
III participants unless otherwise indicated. The corporate responsibilities of
Class I and Class II participants are discussed in the preceding Report of the
Compensation Committee under the caption "1993 Compensation".
20
<PAGE>
ANNUAL INCENTIVE COMPENSATION PLAN
AWARDS FOR 1993 AWARD YEAR
<TABLE>
<CAPTION>
DOLLAR VALUE($) DOLLAR VALUE($)
NAME AND BASED ON BASED ON NET DOLLAR VALUE($)
PRINCIPAL POSITION EARNINGS PER SHARE OPERATING INCOME TOTAL AWARD
- ----------------------------------------------------------- -------------------- ------------------- ---------------
<S> <C> <C> <C>
H. Furlong Baldwin--Class I................................ $ 58,400 $ 194,700 $ 253,100
Chairman of the Board and Chief Executive Officer
Douglas W. Dodge--Class II................................. $ 30,800 $ 102,600 $ 133,400
Vice Chairman of the Board
Edward K. Dunn, Jr.--Class II.............................. $ 24,300 $ 80,900 $ 105,200
President
Brian B. Topping--Class II................................. $ 24,300 $ 8,100 $ 32,400
Vice President
John A. O'Connor, Jr....................................... $ 7,300 $ 24,300 $ 31,600
Senior Vice President and Secretary
All current executive officers of Mercshares (9) as a group
(including the 5 named above)............................ $ 168,100 $ 487,300 $ 655,400
All employees of Mercshares and Affiliates (44) as a group
(including executive officers of Mercshares)............. $ 384,200 $ 823,300 $ 1,207,500
</TABLE>
The Board of Directors recommends a vote FOR the approval of the Annual
Incentive Compensation Plan.
REPORT OF AMENDMENTS TO BYLAWS
Article XIII of the bylaws provides as follows:
"These bylaws may be added to, altered, amended, repealed or suspended by a
majority vote of the entire Board of Directors at any regular meeting of the
Board or at any special meeting called for that purpose. Any action of the Board
of Directors in adding to, altering, amending, repealing, or suspending these
bylaws shall be reported to the stockholders at the next annual meeting and may
be changed or rescinded by majority vote of all of the stock then outstanding
and entitled to vote. In no event shall the Board of Directors have any power to
amend this Article."
Since the last Annual Meeting of Stockholders, the Board of Directors
amended the Bylaws, the net effect of which fixed the number of Directors to be
elected at 18.
The practical effect of Article XIII of the bylaws is to vest in the
Directors the power to amend the bylaws, subject to the right of the
stockholders upon their own initiative to change or overrule the action of the
Board after receipt of notice. Accordingly, the provisions of the amended bylaws
are summarized above to provide such notice, and no action is required by the
stockholders unless a motion is made at the meeting to change or overrule the
action of the Board. If such motion were made, a majority of the votes entitled
to be cast on the question would be required for its approval. It may be
expected that the holders of the proxies would vote to sustain the action of the
Directors.
VOTE REQUIRED TO ADOPT RESOLUTIONS
The election of Directors requires a plurality of votes cast at the
meeting.
The ratification of the appointment of Coopers & Lybrand as the independent
certified public accountants and the approval of the Annual Incentive
Compensation Plan each requires the affirmative vote of a majority of the votes
cast at the meeting.
21
<PAGE>
The following principles of Maryland law apply to the voting of shares of
Common Stock at the meeting. The presence in person or by proxy of stockholders
entitled to vote a majority of the outstanding shares of Common Stock will
constitute a quorum. Shares represented by proxy or in person at the meeting,
including shares represented by proxies that reflect abstentions, will be
counted as present in the determination of a quorum. An abstention as to any
particular matter, however, does not constitute a vote "for" or "against" and
will be disregarded in calculating the votes cast as to such matter. "Broker
non-votes" (i.e., where a broker or nominee submits a proxy specifically
indicating the lack of discretionary authority to vote on a matter) will be
treated in the same manner as abstentions.
ANNUAL REPORT OF MERCSHARES
Copies of the Annual Report of Mercshares, for the year ended December 31,
1993, were mailed on or about March 24, 1994, to those persons who were record
holders of stock of Mercshares on March 18, 1994, the record date referred to
above.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Any proposals of stockholders to be presented for inclusion in Management's
proxy materials for the 1995 Annual Meeting of Stockholders must be received by
the Secretary of Mercshares at Two Hopkins Plaza, Baltimore, Maryland 21201 on
or before November 25, 1994. Such proposals are subject to and must be made in
accordance with the proxy regulations under the Securities Exchange Act of 1934.
OTHER MATTERS
Management knows of no other matters which will be presented at the Annual
Meeting. However, if other matters are presented, it is intended that the
persons named in the enclosed proxy will vote the shares represented thereby in
accordance with their best judgment in the interest of Mercshares.
Mercshares will bear the cost of solicitation of proxies and may reimburse
persons holding stock in their names, or in the names of their nominees, or
otherwise, for reasonable expenses incurred in sending proxies and proxy
soliciting materials to their principals. In addition to the solicitation of
proxies by mail, proxies may also be solicited personally, or by telephone, or
telegram, by the officers and employees of Mercshares, without additional
compensation to them.
Mercshares has retained the firm of Hill and Knowlton to assist in the
solicitation activities referred to above for a fee of $5,500 plus expenses.
ANY STOCKHOLDER EXECUTING THE ENCLOSED PROXY MAY REVOKE SUCH PROXY AT ANY
TIME BEFORE IT IS EXERCISED.
JOHN A. O'CONNOR, JR.
Senior Vice President and Secretary
March 24, 1994
22
<PAGE>
EXHIBIT 1
MERCANTILE BANKSHARES CORPORATION AND AFFILIATES
ANNUAL INCENTIVE COMPENSATION PLAN
(AS AMENDED)
1. PURPOSE
This Annual Incentive Compensation Plan (the "Plan") is intended as an
incentive to increase the profitability of Mercantile Bankshares Corporation
(the "Corporation") and its Affiliated Corporations, as defined in Section 3, by
providing an opportunity for certain key executive employees, whose efforts are
deemed to have a direct impact on the earnings of the Corporation or its
Affiliated Corporations, (the "Participants") designated by the Compensation
Committee (the "Committee") of the Corporation's Board of Directors to earn
incentive payments for outstanding ability, achievement and performance and
thereby to participate in the overall profitability of the Corporation.
Participants may be classified as Class I, Class II or Class III Participants
("Class of Participants") depending upon and in recognition of their varying
corporate responsibilities. It is intended that the Plan encourage these key
executive employees to attain pre-established goals by providing recognition and
awards in the form of cash.
Those chosen as Participants shall be eligible to receive a maximum
Incentive Award, as defined in Section 5, in an amount not to exceed the maximum
percent of salary shown on Exhibit A for the applicable Class of Participant.
One portion of the Incentive Award shall be based on the net operating
income of the particular Affiliated Corporation employing the Participant, or
the division of the Affiliated Corporation to which that Participant is assigned
and shall not exceed the maximum percent of salary based on net operating income
shown on Exhibit A for the applicable Class of Participant, as more particularly
described in Section 5.
The other portion shall be based on the earnings per share of the
Corporation and shall not exceed the maximum percent of salary based on earnings
per share shown on Exhibit A for the applicable Class of Participant, as more
particularly described in Section 5.
2. ADMINISTRATION
The Plan shall be administered by the Committee as it shall, from time to
time, be constituted. In addition to its duties as described in this Plan, the
Committee shall interpret the Plan, may prescribe, amend and rescind rules and
regulations relating to the Plan and shall make all other determinations
necessary or advisable for the administration of the Plan. The interpretation
and construction by the Committee of any provision of the Plan, or award made
under the Plan, and any decision or action made or taken by it in connection
with the Plan shall be conclusive and binding. The Committee may, at the expense
of the Corporation, retain counsel to advise it. No member of the Board of
Directors or the Committee shall be liable for any action or determination made
in good faith, or upon the advice of counsel, with respect to the Plan or any
award made under the Plan.
3. AFFILIATED CORPORATIONS
Affiliated Corporations (the "Affiliates") are those corporations or other
forms of business entities, more than 50% of the voting interest of which is
owned or controlled, directly or indirectly, from time to time, by the
Corporation and which have furnished the Committee with a certified copy of a
resolution evidencing adoption of this Plan.
I-1
<PAGE>
4. PARTICIPANTS
Eligibility
Individuals eligible to be Participants in the Plan, and to receive
Incentive Awards under the Plan, shall be those key executive employees of the
corporation and its Affiliates as the Committee, in its sole discretion, shall
select.
A Participant for any calendar year shall be eligible to receive an
Incentive Award for that year. However the Committee may, in its sole
discretion, deny any such Incentive Award or authorize payment of part thereof
to any Participant for any calendar year who is not a full time employee on
December 31 of that calendar year or whose employment terminates for any reason
during that calendar year, or who is granted a leave of absence during that
calendar year.
Selection
The Committee, prior to December 31 of the year preceding each calendar
year for which any award may be made (the "Award Year"), (prior to April 1, 1994
for the 1994 Award Year), shall select those individuals who are to be
Participants in the Plan for that particular Award Year, designate the
Participant as a Class I, Class II or Class III Participant, determine whether
the portion of the Participant's award attributable to net operating income
shall be based on the total net operating income of the Affiliate employing the
Participant, or the net operating income of the particular division of the
Affiliate to which the Participant is assigned and designate the Base Year for
purposes of Section 5. Failing a specific classification, a Participant shall be
deemed to be a Class III Participant. Each Participant shall be notified of
selection promptly.
5. THE INCENTIVE AWARD
(a) Definitions
For purposes of determining Incentive Awards made under the Plan:
Incentive Award shall mean cash payments made pursuant to the
computation described in Section 5(b) below.
Award Year shall mean that particular calendar year for which an award
may be made under this Plan.
Earnings Per Share shall mean the dollar amount of the consolidated
earnings per share of the Corporation's common stock.
Net Operating Income shall mean the dollar amount of the net after tax
operating income of each Affiliate or one or more divisions of an
Affiliate, as the Committee shall determine.
Base Year Earnings Per Share shall mean Earnings Per Share as stated
in the Corporation's Annual Report to Shareholders, for the Base Year,
which Earnings Per Share may be adjusted, as necessary, from time to time,
to reflect mergers, acquisitions, sales, stock dividends, or other
corporate changes affecting earnings per share.
Base Year Net Operating Income shall mean the Net Operating Income for
the Base Year, as reported to the Board of Directors of the Corporation, or
otherwise published, which Net Operating Income may be adjusted, as
necessary, from time to time, to reflect mergers, acquisitions, sales,
stock dividends, intercorporate and intracorporate transfers of operations
or operating divisions, or other corporate changes.
Preceding Year Earnings Per Share shall mean the Earnings Per Share
for the year preceding the Award Year, to be stated in the Corporation's
Annual Report to Shareholders for the Award Year, which may be adjusted, as
necessary, from time to time, to reflect mergers, acquisitions, sales,
stock dividends, or other corporate changes affecting earnings per share.
I-2
<PAGE>
Preceding Year Net Operating Income shall mean the Net Operating
Income for the year preceding the Award Year, as reported to the Board of
Directors of the Corporation, or otherwise published, which may be
adjusted, as necessary, from time to time, to reflect mergers,
acquisitions, sales, stock dividends, intercorporate and intracorporate
transfers of operations or operating divisions, or other corporate changes.
Award Year Earnings Per Share shall mean the Earnings Per Share for
the Award Year.
Award Year Net Operating Income shall mean the Net Operating Income
for the Award Year.
Annual Rate of Growth shall be the percent determined by calculating
the annual rate of growth between: (1) the Preceding Year Earnings Per
Share and the Award Year Earnings Per Share and (2) the Preceding Year Net
Operating Income and the Award Year Net Operating Income, as the case may
be.
Compounded Rate of Growth shall be the percent determined by
calculating the annual compounded percentage rate of growth between (1) the
Base Year Earnings Per Share and the Award Year Earnings Per Share, and (2)
the Base Year Net Operating Income and the Award Year Net Operating Income,
as the case may be.
Salary shall mean the Participant's base rate of pay for the calendar
year immediately preceding the Award Year.
Salary Award Percentage shall be the percent of salary based on
varying rates of growth as shown on Exhibit "B".
(b) Computation
The Committee, prior to March 1 following each Award Year, shall compute
the Annual Rate of Growth and the Compounded Rate of Growth of both Award Year
Earnings Per Share, and Award Year Net Operating Income for each Affiliate, or
division of an Affiliate, that employs a Participant.
If the Compounded Rate of Growth of the Award year Earnings Per Share shall
not exceed 5.00%, then no cash payment shall be made based on Award Year
Earnings Per Share. If the Compounded Rate of Growth of the Award Year Earnings
Per Share shall exceed 5.00%, each Participant shall be entitled to receive a
cash payment equal to that percent of salary opposite the rate of growth equal
to the Annual Rate of Growth as shown on Exhibit "B" for the Class of
Participant applicable to that Participant.
If the Compounded Rate of Growth of the Award Year Net Operating Income for
any Affiliate, or a division of the Affiliate where applicable, shall not exceed
5.00%, then no cash payment shall be made to any Participant employed by such
Affiliate, or such division, based on Award Year Net Operating Income. If the
Compounded Rate of Growth of the Award Year Net Operating Income for any
Affiliate, or such division, shall exceed 5.00%, each Participant employed by
such Affiliate, or such division, shall be entitled to receive a cash payment
equal to that percent of salary opposite the rate of growth equal to that
Affiliate's, or such division's Annual Rate of Growth as shown on Exhibit "B"
for the Class of Participant applicable to that Participant.
Percentages used in determining Annual Rate of Growth exceeding 5.00% shall
be rounded to the nearest whole percent.
No Participant shall be entitled to receive in total Incentive Awards more
than the percent of Salary applicable to the Class of that Participant as shown
on Exhibit "A" for any one calendar year, nor shall any Participant receive an
Incentive Award in excess of $750,000 for any one calendar year.
(c) Notification of Award
The Committee, prior to the March 1 following each Award Year shall
determine, based on the above Computation, whether any Participant shall be
entitled to an Incentive Award under the Plan and shall make such award. The
Committee shall then notify all Participants of the results of its
I-3
<PAGE>
determination and shall advise each Affiliate employing a Participant of the
amount to be paid that Participant.
6. PAYMENT
(a) Payment of Incentive Awards made under this Plan shall be paid in cash
promptly upon receipt of the notice described in Section 5 by each Affiliate
with respect to Participants employed by that Affiliate.
(b) Payment of an Incentive Award due a Participant who dies after December
31 of the Award Year shall be made to the person, estate, trust, organization or
other entity designated by the Participant to receive benefits under the
Corporation's or any Affiliate's Group Life Insurance Policy unless another
Beneficiary is designated by the Participant. In the absence of any Beneficiary
so designated, the estate of the Participant shall be the Beneficiary.
7. COMMITTEE REPORTS
The Committee shall file with the Board of Directors of the Corporation,
and each Affiliate employing a Participant, on or before April 1 of each
calendar year, a report which shall set forth.
(a) The total Incentive Awards paid under the Plan for the prior year
together with the basis for the computation of those awards, and
(b) The Participants, and their total salary, selected for the year in
which the report is made.
8. REVOCATION OR REDUCTION OF SELECTION OR AWARD
Any Incentive Award made by the Committee, or the selection of a
Participant by the Committee, may be revoked or, in the case of an Incentive
Award, reduced by the Committee at any time if such Participant's employment by
the Corporation, or an Affiliate, is terminated because of dishonesty, fraud,
embezzlement, conviction of a felony, or for any other reason as determined in
the sole discretion of the Committee.
9. ASSIGNMENT
A Participant's rights and interests under this Plan may not be assigned,
transferred, pledged or hypothecated and are not subject to attachment,
garnishment, execution or any other creditor's processes and, to the extent
permitted by law, the Corporation and any Affiliate shall not be bound by any
attempted assignment, alienation or creditor's process and shall be entitled to
make any payment under the Plan directly to a Participant or Beneficiary.
10. NO EMPLOYMENT CONTRACT
Nothing contained in this Plan, nor any selection or award made pursuant to
this Plan shall confer upon any Participant any rights to continue in the employ
of the Corporation or any Affiliate or to interfere in any way with the right of
the Corporation or any Affiliate to reduce a Participant's compensation at any
time and all Participants shall remain subject to discharge, or compensation
reduction, the same as if this Plan had not been adopted.
11. AMENDMENT OR TERMINATION
This Plan may be amended or terminated at any time by action of the Board
of Directors of the Corporation and notice of such action shall be given
promptly to the Boards of Directors of the Affiliates.
12. EFFECTIVE DATE
This Plan shall be effective January 1, 1981.
I-4
<PAGE>
<TABLE>
EXHIBIT "A"
MAXIMUM ANNUAL AMOUNT OF AWARD
<CAPTION>
MAXIMUM % OF SALARY
BASED ON
----------------------------------
CLASS OF MAXIMUM % EARNINGS PER NET OPERATING
PARTICIPANT OF SALARY SHARE INCOME
- ------------------------------------------------------------------------ --------------- --------------- -----------------
<S> <C> <C> <C>
Class I................................................................. 65.0 32.5 32.5
Class II................................................................ 50.0 25.0 25.0
Class III............................................................... 33.0 16.5 16.5
</TABLE>
<TABLE>
EXHIBIT "B"
PERCENT OF SALARY AWARD BY CLASSIFICATION OF PARTICIPANT
<CAPTION>
ANNUAL RATE CLASS CLASS CLASS
OF GROWTH I II III
- ---------------------------------------------------------------------------------------------- ----------- --------- -----------
<S> <C> <C> <C>
5............................................................................................. 0 0 0
6............................................................................................. 3.0 2.25 1.5
7............................................................................................. 6.0 4.50 3.0
8............................................................................................. 9.0 6.75 4.5
9............................................................................................. 12.0 9.00 6.0
10............................................................................................ 15.0 11.25 7.5
11............................................................................................ 18.0 13.50 9.0
12............................................................................................ 21.0 15.75 10.5
13............................................................................................ 24.0 18.00 12.0
14............................................................................................ 27.0 20.25 13.5
15............................................................................................ 30.0 22.50 15.0
</TABLE>
I-5
<PAGE>
(The information below appears on the front of the Proxy Voting Card.)
MERCANTILE THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
BANKSHARES
CORPORATION The undersigned hereby appoints H. Furlong Baldwin, Douglas W.
Dodge and Edward K. Dunn, Jr., and each of them, the proxies of
the undersigned, with several powers of substitution, to act and
PROXY vote at the ANNUAL MEETING OF STOCKHOLDERS of Mercantile Bankshares
Corporation, Two Hopkins Plaza, Baltimore, MD 21201 to be held on
WEDNESDAY, APRIL 27, 1994, AT 10:30 A.M., and at any and all
adjournments thereof.
1. Election of Directors [ ] FOR all nominees listed below
(except as shown to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees
listed below
The Board of Directors recommends a vote FOR
H. Baldwin, T. Bancroft, R. Berndt, J. Block, G. Bunting, D. Dodge, E. Dunn,
B. Jenkins, R. Kunisch, W. McCarthy, M. Offit, C. Poindexter, W. Richardson,
B. Robinson, D. Shepard, B. Topping, J. Wilson, C. Zamoiski.
(Instructions: To withhold authority to vote for any individual nominee print
that nominee's name on the space provided below)
- -----------------------------------------------------
2. Ratification of appointment of Coopers & Lybrand as the independent certified
public accountants for Mercshares
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR
3. Approval of the Mercantile Bankshares Corporation and Affiliates Annual
Incentive Compensation Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The Board of Directors recommends a vote FOR
4. Upon such matters as may properly come before the meeting
<PAGE>
(The information below appears on the back of the Proxy Voting Card.)
PLEASE MARK, SIGN, DATE AND MAIL IN THE ENCLOSED ENVELOPE. NO POSTAGE NEEDED
IF MAILED IN THE UNITED STATES.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF
DIRECTIONS ARE NOT INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR
RATIFICATION OF THE APPOINTMENT OF AUDITORS, AND FOR APPROVAL OF THE MERCANTILE
BANKSHARES CORPORATION AND AFFILIATES ANNUAL INCENTIVE COMPENSATION PLAN. If a
Director nominee is unable to serve, the within Proxy may be voted for a
substitute nominee.
Receipt of notice of the meeting and Proxy Statement is hereby
acknowledged, and the terms of the notice and statement are hereby incorporated
by reference into this Proxy. The undersigned hereby revokes all proxies
heretofore given for said meeting and any adjournment thereof.
WITNESS the hand and seal of the undersigned, the day of
, 1994.
Signature(s) should follow exactly the name(s) on the stock certificate. All
co-owners should sign. Executors and Administrators may sign as such.
Attorneys-in-fact should sign both names.
.................................................. (SEAL)
.................................................. (SEAL)
<PAGE>
(These notices are filed pursuant to Rule 14a-6 as possible
additional soliciting material.)
MERCANTILE BANKSHARES CORPORATION
TWO HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
To The Stockholders:
AN IMPORTANT REMINDER...
The Annual Meeting of Stockholders of Mercantile Bankshares Corporation will
be held on April 27, 1994.
Unless you return a proxy card, or attend the meeting and vote in person, your
shares will not be voted at this meeting. If your proxy is in the mail, thank
you for responding. If not, would you please take the time now to complete
and mail the enclosed duplicate proxy card. A postage-paid envelope has been
provided for your convenience.
YOUR VOTE IS IMPORTANT!
PLEASE ACT IMMEDIATELY!
<PAGE>
MERCANTILE BANKSHARES CORPORATION
TWO HOPKINS PLAZA
BALTIMORE, MARYLAND 21201
To The Stockholders:
AN IMPORTANT REMINDER...
The Annual Meeting of Stockholders of Mercantile Bankshares Corporation will
be held on April 27, 1994.
Your shares are held in the name of a bank or nominee. Unless we receive a
proxy card, your shares will not be voted at this meeting.
If your proxy is in the mail, thank you for responding. If not, would you
please take the time NOW to sign, date and mail your proxy in the enclosed
postage-paid envelope.
YOUR VOTE IS IMPORTANT!
PLEASE ACT IMMEDIATELY!
